As the new year starts we all set goals and have ambitions to make it a year to remember – as we should. But sometimes we need simple philosophical shifts too. Small shifts that can have a dramatic impact. One of mine is to ‘value myself appropriately’. As startup entrepreneurs an important part of the process is to be a bootstrapper, to maximise the limited resources we have to gain the momentum we need. This often leads us to doing it all ourselves. To be our own courier, printer, door knocker, community manager, clerk, mail room assistant…. anything and everything which is possible to do ourselves. And this is one of the greatest false economies in startup land. A simple rule to circumvent such folly is this:
Never do a task which can be outsourced at a lower hourly rate than what the open market would pay you for that hour.
While it’s easy to argue that we aren’t actually paying ourselves the market rate, it is certainly true that we should be creating the value of our market rate. And this is usually at least double the pay rate. Hence a person earning $100 per hour, should be generating at least $200 per hour for their organisation. Every hour wasted doing a menial task, has more impact than we actually think. Let’s take this simple example:
If we work 60 hours a week for 50 weeks for 2 years and end up with an equity stake valued at $3 million our hourly rate comes out at $500.
Which doesn’t leave many tasks that are worth doing ourselves. Startup blog says value yourself in 2013!
Great 7 minute interview with Seth Godin which is both insightful and inspirational on the new economy.
The good people at Ibis World just released a report on which industries are facing the biggest declines. You can probably guess a few of them, and the major culprit behind the decline is another mainstay of change: Technological Development. The numbers are from the US economy over the past decade, but I think it’s a fair representation of what is occurring in most first world developed economies.
So while you peruse the list, have a think about the incumbents and if they saw it coming or were in denial. Also have a think about where technology is taking us and if you can be a driving force behind flipping an existing industry on it’s head with your new startup! Enjoy.
1. Apparel Manufacturing
Has declined by 77% over the past decade. Simple reason. Cost of wages in labour intensive industry.
2. Music Stores
In the past decade almost 80% of all music stores have closed down in the USA. Sales recorded music sold on a physical transportable device (Tapes, CD’s, LP’s et al) have declined 76.3% in the past 10 years. The only chance for survival is to be very niche, like some ‘drive in cinemas’ have done. even cultural icons, like Tower Records below have succumbed to the inevitable. If you look closely at the pic below, you might even see the who was behind it all…
3. Manufactured Home Dealers
Declined by over 70% in the past decade. Who knew?
4. Photo development
Photo finishing faced a 69% decline, which digital photography is entirely responsible for. Facebook and Flickr are quickly replacing the photo album, and Kodak got caught napping as this happened. The truth is that 1 hour is still 59 minutes and 59 seconds slower than digital. The question is whether the increasing level of awesomeness of cameras in mobile phones will make stand alone digital cameras redundant?
5. Wired Communications
Wired telecoms declined by 54.9% since the year 2000. The evidence exists with how many people you know who’ve ‘turned off’ their fixed line connection. Long distance and overseas has equally been decimated by Skype which comes at peoples favourite price point – ‘free’ – with the added benefit of video. It’s pretty clear that I life without wires is better than a life with them.
Manufacturing suffered a 50% decrease. Seems they are closing all the factories down in Allan Town – as 23% have closed down since 2000. It’s a pretty simple formula here as reduced trade barriers and low wage markets have concocted this reality.
7. Newspaper Publishing
You’re reading this on-line, and you probably get most of your news the same way. Hence it isn’t a great surprise that newspaper publishing has declined 35.9% in the past decade. What’s really interesting is that most of us consume more news and content than ever before, we just get it in different places from different people. The problem with most publishers is that they confuse the delivery mechanism (the physical publishing) with why they actually exist. Granted, lower barriers to deliver any form information has made the old model almost impossible to maintain. I’d also argue that the pay walls being put up by Rupert Murdoch and the New York Times won’t cut it when valid substitutes are ‘free’.
8. DVD, Game & Video rental
A percentage decrease of 35.7% which is easy to see as local video & DVD rental stores close down. The on-line alternative is simply superior. Enough said.
9. Formal Wear & Costume rental
A curious one as this industry has declined by 35%. Most probably a combination of reduced prices for textiles in general and the casualisation of dress throughout society.
10. Video Post Production
With standard simple digital manipulation tools on our desk top, services of this nature have been hurt. They’ve declined by 24.9% in the past decade. Only the very high end have survived.
I was asked today about how blogs should be built and leveraged from a commercial perspective. It seems to be a regular question I’m asked. The giving element that is required in the blogosphere seems counter intuitive to the way our minds have been trained via the industrial complex. They often struggle with the fact that we just have to give, and the law of natural economics just kicks in. So I came up with this analogy which I think makes sense and explains how it should be approached philosophically.
Blogs are like a football stadium.
The game is played in the middle of the ground.
In blogs the middle of the ground happens to be where our posts are geographically placed.
This is why people come to our blog. To see the action. To learn from and be entertained by the actual game (posts)
But like all good stadiums we have related infrastructure around the edges. Our details, company, tweetstream, contacts.
If they like the game we play (our posts) they return. The crowd gets bigger, and they tell their friends to come.
Like the stadium the revenue comes from all the related elements like the concession stands, the parking and the sponsorship. The stuff that generally lives around the edges… both in stadiums and our blogs.
But we must never forget why they are here. To enjoy the game. They only ever return because the enjoy the game (the blog posts). So what we need to do is build our industry around the game, rather than charging for tickets at the gate. Charging entry just doesn’t work beause there is far too many games they can attend. (more than 200 million in fact)
So when someone asks you about how to make a blog work. Remind them of ‘stadium economics’ and that it’s the quality of the information and entertainment which earns us the right to sell them the occasional hot dog.
Lately I’ve been making a few decisions which are economically irrational. Making decisions which are, on the face of it, financially inept.
He’s not the cheapest and he’s not the best. Probably somewhere in the middle for both. I could probably get someone cheaper with similar skills, or better for the same price. But I don’t. In fact I tell him that I’m loyal to him. A large part of why I want to succeed so that he can succeed also, to share it with him. Even though he has not risked the capital, or the time that I have on the project.
Why would I act this way. Well I like working with him. He’s a nice guy, and sometimes that’s enough.
I guess you could call me an Economic Irrrationalist. And it just feels right.
With the exceptions of reading and writing, all of the most important things I know (and can do for that matter) have been 100% self taught.
Marketing, Public speaking, Entrepreneurship, Motivating others, Creative writing, Financial Investing, Surfing, Gardening / Growing vegetables, Weight training, Riding a bicycle…. everything.
I think the best way to learn is by paying attention and being curious. Which always leads me to observing others, reading and getting out there and having a go at things.
Observe, Read, Try. Repeat.
That’s it. I find that when the desire is there, the rest comes easy. Which is why I’ve always done much better at everything outside of my schooling. Things for which I had real desire. The unfortunate thing about this ingredient, is that it is removed from most of the development & selection programs in modern society. Instead, we say ‘Rote learn this’, then we might let you do something you care about. One great example is that Architecture University studies require physics as a prerequisite, and yet Architecture studies don’t involve physics, and architects never do the engineering function in building.
Startup blog advice: Don’t let a terrible system, reduce belief in your own capabilities. The stuff that kept you out, you didn’t really care about anyway. It was a rule built by someone else to protect themselves. If you forge ahead and teach yourself, the right people will notice. They will come searching for you because they understand not just the importance of what your know, but the value of how you went about learning it.
There are 3 major economic models we see with web businesses.
Option 3. Take more value (either from VC’s or customers) than the value they create.
Option 2 ends up selling advertising, or to another internet company with deep pockets – Facebook comes to mind. We are not Facebook, we will never be Facebook. We don’t have the page impressions, loyalty or any of the stuff needed to sell enough advertising, or sell the entire ship.
Startup blog advice is simple. If you want to have a web business, have a price for your service. Call me old fashioned, but it’s the simplest way to make a living on the web. Sure, we may have to provide more than what we sell – have an augmented product, but the economics of ‘free’ aren’t enough for ‘us’. Free might work for them…. But if we’ want to survive, we’ve got to sell something. If people wont buy what we sell, then we have 2 options.
(A) Improve what we offer
(B) Sell something different
But be sure of this, we need a price and giving stuff away is a quick way to go out of business.